Car Insurance With Bad Credit: How to Get Affordable Rates When Your Score Is Low

In 47 states, your credit score directly impacts your car insurance premium - and the effect is larger than most people realize. Drivers with poor credit pay an average of 71% more than those with excellent credit, according to 2025 industry data. On a typical policy, that's an extra $800-$1,200 per year. Here's what you need to know and how to fight back.

How Insurers Use Credit Scores

Insurance companies don't use your standard FICO credit score. They use a "credit-based insurance score" - a separate scoring model that weighs credit factors differently. The most common model is LexisNexis Insurance Score, which emphasizes payment history (paying bills on time), outstanding debt (especially credit utilization ratio), credit history length (longer is better), new credit inquiries (fewer is better), and types of credit (diverse credit mix is favorable).

Insurance companies justify credit-based pricing with actuarial data showing that drivers with lower credit scores file more claims on average. Consumer advocates argue this is unfairly discriminatory, especially against minorities and low-income households. Regardless of the debate, it's the reality in most states.

States Where Credit Can't Be Used

Three states prohibit the use of credit in auto insurance pricing: California (Proposition 103), Hawaii, and Massachusetts. If you live in one of these states, your credit score has zero impact on your premium. Several other states limit how much credit can influence pricing, including Maryland, Oregon, and Utah.

How Much Bad Credit Actually Costs You

We ran identical driver profiles through major insurers at different credit tiers to see the real impact. For a 35-year-old driver with a clean record driving a 2022 Honda Accord: Excellent credit (800+): average $1,400/year. Good credit (700-799): average $1,600/year (+14%). Fair credit (600-699): average $2,000/year (+43%). Poor credit (below 580): average $2,400/year (+71%).

The $1,000 difference between excellent and poor credit is striking - it's more than the premium impact of a speeding ticket and nearly as much as an at-fault accident. Improving your credit is one of the highest-ROI financial moves you can make specifically for insurance savings.

7 Strategies for Lower Rates With Bad Credit

1. Shop around relentlessly. Insurers weigh credit differently. GEICO and Progressive tend to be less punitive toward low-credit drivers than Allstate and Liberty Mutual. The spread between insurers can be $500+/year for the same low-credit profile. Get at least 5 quotes.

2. Ask about credit re-scoring at renewal. If you've improved your credit since your policy started, ask your insurer to re-pull your credit at renewal. Some do this automatically; others require you to request it. A 50-point credit improvement mid-policy could save $200-$400 at renewal.

3. Focus on quick credit wins. The fastest ways to boost your insurance score: pay down credit card balances below 30% utilization (the biggest single factor), set up autopay on all bills to ensure on-time payments, dispute any errors on your credit report (found in about 25% of reports), and avoid opening new credit accounts before shopping for insurance.

4. Bundle everything possible. Bundling discounts apply regardless of credit and can offset some of the credit penalty. Combining auto + renters insurance at State Farm can save 15-25% - reducing a credit-inflated premium significantly.

5. Maximize every other discount. Stack telematics, low mileage, safety features, paperless billing, and autopay discounts. A 25-35% combined discount from these sources can nearly offset the credit surcharge.

6. Consider state minimum coverage temporarily. If your premium is extremely high due to credit, carrying state minimum liability for 6-12 months while you improve your credit, then upgrading coverage once rates drop, can be a pragmatic short-term strategy. This carries more risk but may be necessary if premiums are truly unaffordable.

7. Move to a credit-blind state. If you're considering relocation and have poor credit, California, Hawaii, and Massachusetts prohibit credit-based insurance pricing. Moving from a credit-heavy state to California can save $500-$1,000/year on auto insurance alone for low-credit drivers.